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I find it very ironic (in a funny way) how the comments for funding rounds always have a sense of disappointment on Hacker News. We are all reluctantly expectin

I find it very ironic (in a funny way) how the comments for funding rounds always have a sense of disappointment on Hacker News. We are all reluctantly expecting the worst when private equity and venture capital get involved despite being under the roof of a VC, in essence. I am surprised like another commenter that Arduino has to raise money, on the other hand. I wish it was a bit clearer on how this money ties into their strategy, are they planning to fund R&D, marketing, or manufacturing. What will Arduino look like in two years, and which stick are we getting enshittified?

rwmj 3y ago
Why not be negative? They're not being given $22m for funsies. The backers will want a 10x return, so somehow Arduino must now raise their value to $220 million (actually $540 million, since they raised $54m in total). Where's that money coming from?
- deleted 3y ago
  [deleted]
- evrimoztamur 3y ago
  I understand your concerns, I am just pointing out the general dissatisfaction raised here and the expectation of enshittification being the default. I would also like to point out that you are extrapolating a bit too hard. The claim that backers will want a 10x return is not necessarily correct, nor are the examples of 220/540m valid from a valuation perspective. There are PE firms which do not seek such exorbitant returns. Without having eyes on Arduino's financials, it's hard to say that the growth expectations are as noted. As for the valuation, the implied post-money (i.e. after-investment) valuation depends on for what percentage of equity the 54m was offered for (where the implied post-money valuation would be 54m divided by the percentage, e.g. 108m with 54m paid for 50% of ordinary shares). Other factors such as preferences etc. impact this too. I wouldn't be so eager to get mad, that's all. I am still hopeful for Arduino's future and hope that they put the capital to good use (instead of '10x'ing it).
  - svnt 3y ago
    Except they did not accept funding from PE firms, they accepted it from completely typical VC funds, who state on their websites things such as the following: “Anzu Partners is an investment firm that focuses on industrial and life science technology companies with the potential to transform their industries.” “[CDP Venture Capital seeks to] foster the growth of the Italian market by attracting new national and international investors to the Venture Capital asset class by promoting a new culture of Venture Capital and entrepreneurship in Italy.” In case you are unaware, these statements are VC dog whistles for not 10x but 100-1000x returns, without some probability of which the VC model does not work financially.
    - nylonstrung 3y ago
      This is entirely untrue- this is squarely in the realm of growth investment, for which you're typically underwriting for 3-5x cash on cash returns over a 5 year old period It is extremely unlikely that these funds see a path to returning >10x Source: 7 years VC experience
  - kriro 3y ago
    Maybe things have changed but the VC model is usually unicorn or GTFO. Of course not every company will turn into one but every company they invest in should have the potential. If I'm a VC I invest in Arduino because of two storylines. It's either the "Coke" of microcontrollers (sticky brand) or the "Github of microcontrolers" (sticky platform via IDE) or a combination of both.
    - nylonstrung 3y ago
      VC as an asset class encompasses a lot of different risk/reward profiles What you're describing is more typical of a seed fund that is counting on one deal to return the portfolio In a growth deal like this, esp with such an old company by VC terms, funds tolerate lower upside in exchange for capped downside and predictable returns, given that the chances the chances of complete failure/bankruptcy are comparatively less
- CodesInChaos 3y ago
  They raised $22, but the valuation was probably closer to $100M (or even more if they raised $54 not $22). So for an investor to 10x their money, the exit needs to be for $1B or more.
- hackernewds 3y ago
  Raise their value by* They're worth more than the money they raise. Unless they passed on 100% of the company (which they didn't)
- eriktrautman 3y ago
  They need more than that - they raised $22M but only for a portion of the company so presumably at a valuation of multiples of that. To get a 10x valuation it may have to become a unicorn.
marcosdumay 3y ago
There's a huge difference between a company with a business model capable of taking over the world getting some investment, and one with a business model that is necessarily niche. What kind of market does Arduino expect to get into with that money? I can't see any.
- martin_a 3y ago
  > What kind of market does Arduino expect to get into with that money? I can't see any. Maybe professional users like Raspberry Pi did (with the known consequences)? Getting out of that hobby/tinkerer niche with lots of counterfeits from China is probably something to strive for.
  - jan_Sate 3y ago
    The problem with Arduino is that, whatever microcontroller they're using can be easily sourced by anyone else. That's why it's so easy to clone them. For Raspberry Pi, those mobile phone SoC are rather difficult to source. You need to have contact with the SoC vendor to get a hand on them.
    - gh02t 3y ago
      Sure, but "real" industry users want support for the hardware and software. They will pay for support contracts and customization if it saves them in house labor time.
- flkenosad 3y ago
  Maybe the IoT market. Lots of demand for low-power hardware these days.
  - marcosdumay 3y ago
    The Arduino is very expensive on the context of mass-produced circuits. But yeah, maybe they'll use the money to get some cheaper wholesale products. Or maybe they'll expand their hardware to fully support low-scale IoT. I'm not sure there is enough potential for low-scale IoT for that investment to pay off. But doing something cheaper can indeed work, and requires some money. Too bad they aren't explaining what they'll do. The buzzword density of the article doesn't add any confidence that the company managers know what they are doing, but it could be a smoke screen.
renewiltord 3y ago
Well, considering that many HN users seem to be under the impression that this is a loan ("$54 m of debt to service" etc.) I don't think there's much point in assigning any importance to the opinions.
- evrimoztamur 3y ago
  With equity you just have different obligations, I responded to a rather cynical commenter above on my take. I agree, but it's not free either. Equity holders can exercise power in different manners, usually more hostile due to the decisive power they have.
  - renewiltord 3y ago
    What power they have depends on the terms, the board composition, etc. and yes they can screw you. You know that, of course, but really the thing is that the sentiment here is information-free and an indicator of that is the inability to tell the difference between debt and equity. i.e. the sentiment and the result are independent events.
hoherd 3y ago
Not everybody here is "under the roof of a VC". I recently read a very inspiring article here about a successfully bootstrapped company. It's too bad more companies can't get off the ground without VC funding. I also think the cynicism hits extra hard when this happens with direct-to-consumer and educational companies. I don't think people care quite so much when a B2B company takes a round of funding because whatever change happens there is not something that will likely hit consumers directly, and of course the whole for-profit educational aspect has been been beaten to death.
- ljlolel 3y ago
  He’s talking about how HN is magnanimously hosted by the VC firm YCombinator
- candiddevmike 3y ago
  The thing that sucks about bootstrapping is a VC-backed company can very easily kill your business--more money, neutral or negative margins, more connections, etc. They have an unfair advantage from the gate, and they will most likely be acquired before you do.
- whimsicalism 3y ago
  Where are you posting? That is the reference
deleted 3y ago
[deleted]
LispSporks22 3y ago
> funding rounds always have a sense of disappointment on Hacker News I think it has changed over time. There used to be an absolute jerk fest in the comments section on VC funding years ago.
matheusmoreira 3y ago
It's disappointing because we know exactly what's coming afterwards: the "monetization" which will ruin something that was once great. How many times have we seen it happen? Investors want their returns, they want them now and they will make them turn the screws until all remaining value is extracted. We may be under the roof of a VC but the site is called Hacker News. Not everyone is gonna be a fan of startups.
raincole 3y ago
> We are all reluctantly expecting the worst when private equity and venture capital get involved despite being under the roof of a VC, in essence. It's a very interesting usage of "despite". - People who know HN are more likely to know Y Combinator. - People who know Y Combinator are more likely being following news about startups or working for one. - People who follow news about startups are more likely to witness things going bad after receiving VC funds.
sergiotapia 3y ago
What other possible outcome can there be? VC funding demands VC results. It's the only path forward.

rwmj 3y ago

Why not be negative? They're not being given $22m for funsies. The backers will want a 10x return, so somehow Arduino must now raise their value to $220 million (actually $540 million, since they raised $54m in total). Where's that money coming from?

deleted 3y ago
[deleted]
evrimoztamur 3y ago
I understand your concerns, I am just pointing out the general dissatisfaction raised here and the expectation of enshittification being the default. I would also like to point out that you are extrapolating a bit too hard. The claim that backers will want a 10x return is not necessarily correct, nor are the examples of 220/540m valid from a valuation perspective. There are PE firms which do not seek such exorbitant returns. Without having eyes on Arduino's financials, it's hard to say that the growth expectations are as noted. As for the valuation, the implied post-money (i.e. after-investment) valuation depends on for what percentage of equity the 54m was offered for (where the implied post-money valuation would be 54m divided by the percentage, e.g. 108m with 54m paid for 50% of ordinary shares). Other factors such as preferences etc. impact this too. I wouldn't be so eager to get mad, that's all. I am still hopeful for Arduino's future and hope that they put the capital to good use (instead of '10x'ing it).
- svnt 3y ago
  Except they did not accept funding from PE firms, they accepted it from completely typical VC funds, who state on their websites things such as the following: “Anzu Partners is an investment firm that focuses on industrial and life science technology companies with the potential to transform their industries.” “[CDP Venture Capital seeks to] foster the growth of the Italian market by attracting new national and international investors to the Venture Capital asset class by promoting a new culture of Venture Capital and entrepreneurship in Italy.” In case you are unaware, these statements are VC dog whistles for not 10x but 100-1000x returns, without some probability of which the VC model does not work financially.
  - nylonstrung 3y ago
    This is entirely untrue- this is squarely in the realm of growth investment, for which you're typically underwriting for 3-5x cash on cash returns over a 5 year old period It is extremely unlikely that these funds see a path to returning >10x Source: 7 years VC experience
- kriro 3y ago
  Maybe things have changed but the VC model is usually unicorn or GTFO. Of course not every company will turn into one but every company they invest in should have the potential. If I'm a VC I invest in Arduino because of two storylines. It's either the "Coke" of microcontrollers (sticky brand) or the "Github of microcontrolers" (sticky platform via IDE) or a combination of both.
  - nylonstrung 3y ago
    VC as an asset class encompasses a lot of different risk/reward profiles What you're describing is more typical of a seed fund that is counting on one deal to return the portfolio In a growth deal like this, esp with such an old company by VC terms, funds tolerate lower upside in exchange for capped downside and predictable returns, given that the chances the chances of complete failure/bankruptcy are comparatively less
CodesInChaos 3y ago
They raised $22, but the valuation was probably closer to $100M (or even more if they raised $54 not $22). So for an investor to 10x their money, the exit needs to be for $1B or more.
hackernewds 3y ago
Raise their value by* They're worth more than the money they raise. Unless they passed on 100% of the company (which they didn't)
eriktrautman 3y ago
They need more than that - they raised $22M but only for a portion of the company so presumably at a valuation of multiples of that. To get a 10x valuation it may have to become a unicorn.

marcosdumay 3y ago

There's a huge difference between a company with a business model capable of taking over the world getting some investment, and one with a business model that is necessarily niche. What kind of market does Arduino expect to get into with that money? I can't see any.

martin_a 3y ago
> What kind of market does Arduino expect to get into with that money? I can't see any. Maybe professional users like Raspberry Pi did (with the known consequences)? Getting out of that hobby/tinkerer niche with lots of counterfeits from China is probably something to strive for.
- jan_Sate 3y ago
  The problem with Arduino is that, whatever microcontroller they're using can be easily sourced by anyone else. That's why it's so easy to clone them. For Raspberry Pi, those mobile phone SoC are rather difficult to source. You need to have contact with the SoC vendor to get a hand on them.
  - gh02t 3y ago
    Sure, but "real" industry users want support for the hardware and software. They will pay for support contracts and customization if it saves them in house labor time.
flkenosad 3y ago
Maybe the IoT market. Lots of demand for low-power hardware these days.
- marcosdumay 3y ago
  The Arduino is very expensive on the context of mass-produced circuits. But yeah, maybe they'll use the money to get some cheaper wholesale products. Or maybe they'll expand their hardware to fully support low-scale IoT. I'm not sure there is enough potential for low-scale IoT for that investment to pay off. But doing something cheaper can indeed work, and requires some money. Too bad they aren't explaining what they'll do. The buzzword density of the article doesn't add any confidence that the company managers know what they are doing, but it could be a smoke screen.

renewiltord 3y ago

Well, considering that many HN users seem to be under the impression that this is a loan ("$54 m of debt to service" etc.) I don't think there's much point in assigning any importance to the opinions.

evrimoztamur 3y ago
With equity you just have different obligations, I responded to a rather cynical commenter above on my take. I agree, but it's not free either. Equity holders can exercise power in different manners, usually more hostile due to the decisive power they have.
- renewiltord 3y ago
  What power they have depends on the terms, the board composition, etc. and yes they can screw you. You know that, of course, but really the thing is that the sentiment here is information-free and an indicator of that is the inability to tell the difference between debt and equity. i.e. the sentiment and the result are independent events.

hoherd 3y ago

Not everybody here is "under the roof of a VC". I recently read a very inspiring article here about a successfully bootstrapped company. It's too bad more companies can't get off the ground without VC funding. I also think the cynicism hits extra hard when this happens with direct-to-consumer and educational companies. I don't think people care quite so much when a B2B company takes a round of funding because whatever change happens there is not something that will likely hit consumers directly, and of course the whole for-profit educational aspect has been been beaten to death.

ljlolel 3y ago
He’s talking about how HN is magnanimously hosted by the VC firm YCombinator
candiddevmike 3y ago
The thing that sucks about bootstrapping is a VC-backed company can very easily kill your business--more money, neutral or negative margins, more connections, etc. They have an unfair advantage from the gate, and they will most likely be acquired before you do.
whimsicalism 3y ago
Where are you posting? That is the reference

deleted 3y ago

[deleted]

LispSporks22 3y ago

> funding rounds always have a sense of disappointment on Hacker News I think it has changed over time. There used to be an absolute jerk fest in the comments section on VC funding years ago.

matheusmoreira 3y ago

It's disappointing because we know exactly what's coming afterwards: the "monetization" which will ruin something that was once great. How many times have we seen it happen? Investors want their returns, they want them now and they will make them turn the screws until all remaining value is extracted. We may be under the roof of a VC but the site is called Hacker News. Not everyone is gonna be a fan of startups.

raincole 3y ago

> We are all reluctantly expecting the worst when private equity and venture capital get involved despite being under the roof of a VC, in essence. It's a very interesting usage of "despite". - People who know HN are more likely to know Y Combinator. - People who know Y Combinator are more likely being following news about startups or working for one. - People who follow news about startups are more likely to witness things going bad after receiving VC funds.

sergiotapia 3y ago

What other possible outcome can there be? VC funding demands VC results. It's the only path forward.